Fact Check: Provider Consolidation Driving Up Costs

Download PDF Report >>> Fact Check – profits and consolidation

Fact Check:  Provider Consolidation Driving Up Costs

  • · Massachusetts Attorney General issued a report that: “points to the market clout of the best-paid providers as a main driver of the state’s spiraling health care costs” and “found no evidence that the higher pay was a reward for better quality work or for treating sicker patients”.
  • · According to a new report in Health Affairs, Paul Ginsburg and Robert Berenson found that “providers’ growing market power to negotiate higher payment rates from private insurers is the ‘elephant in the room’ that is rarely mentioned.”
  • · According to a brief from the National Institute for Health Care Management: “With only a few exceptions, results consistently demonstrate that hospital consolidations result in higher prices for hospital services.”
  • · The Federal Trade Commission and the Depart­ment of Justice noted: “Most studies of the relation­ship between competition and hospital prices have found that high hospital concentration is associated with increased prices, regardless of whether the hospitals are for-profit or nonprofit.”

FACT CHECK CHECKED: The above are arguments that America’s Health Insurance Plans (AHIP) included in their response to advocates of reform. What AHIP may not recognize is it has set forth some of the most compelling arguments for a “public option”.

AHIP freely admits that insurers are powerless on their own to control provider costs. Even with anti-trust exemptions, they have failed to combine forces and confront providers.  Short of a government takeover, the only long-term solution is more clout.  The only entity with more clout is the government itself being an insurer, which, by the way, it already is – Medicare.

Medicare doesn’t so much “ask” providers what they charge.  Medicare almost “tells” providers what it will pay. Republicans were so concerned with Medicare’s clout that they wrote into law “prohibiting” negotiated drug discounts.  But discounts will become necessary.

For many Americans, a drastically reformed healthcare system was a non-starter.  The administration politically tried to blend features of the current into the proposed system to reduce upheaval to such a large part of the economy.  Any change can be unsettling, and how you view it is very important.  Is the glass half full or half empty?  At some point, radical cost control will occur, and private insurers will not be leading the charge.

Insurers can look on government as an unreasonable competitor or they can look on government as the only insurer who finally has enough clout to contain provider costs.  It may be that insurers eventually withdraw from the market for “essential medical benefits” and focus their efforts on supplemental policies that go beyond basic.  If they did, they would look a lot like health insurers in Europe and other industrialized countries. Diminished compared to today but not destroyed.

Download PDF Report >>> Fact Check – profits and consolidation

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